Economists gather to let hair down’

Friday

Aug 31, 2012 at 6:00 AM

By Paul Wiseman THE ASSOCIATED PRESS

Every August, the world’s financial markets shift their attention from the centers of global commerce — New York, London, Tokyo — to a mountain valley in northwest Wyoming. Today, they will hear a speech by Federal Reserve Chairman Ben Bernanke.

So how did Jackson Hole, Wyo., come to wield such outsize importance in global economic affairs?

In a word, trout.

Inspired by a conference the Boston Fed held near a picturesque New Hampshire site, where the tearjerker “On Golden Pond” was filmed, the Kansas City Fed held its 1981 conference in scenic Vail, Colo. The Vail meeting drew the conference’s smallest crowd ever.

Officials at the bank pondered how to draw bigger names and more attention to the yearly confab. That’s when they set their sights on Paul Volcker, then chairman of the Federal Reserve in Washington. They decided to pursue Volcker by dangling the prospect of one of his favorite pastimes: fly-fishing. They needed to find a sure-fire trout-catching spot somewhere in the Kansas City Fed district, which covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

They considered somewhere in Colorado. But a fly-fishing expert said Colorado’s waters were too warm for trout in August. Go farther north, he said. Go to Jackson Hole.

The shift was made. And what’s been known since 1982 as the Jackson Hole Economic Symposium took its place in economic lore.

The event now draws 140 people every year, including some of the biggest names in economic and finance. They come to enjoy breathtaking views of the Grand Teton mountain range and Jackson Lake, to hike and fish and to engage in intellectual combat in the halls of the Jackson Lake Lodge.

“Jackson Hole provides a nice opportunity for central bankers to let down their hair a bit — only figuratively speaking, of course — and mingle with other members of their tribe and a few academics in an informal setting,” says Eswar Prasad, a Cornell University professor who will speak on a Jackson Hole panel this year.

At each year’s Jackson Hole conference, the Fed chairman is a focal point.

Investors started focusing especially intensely on Jackson Hole after Bernanke used his remarks there in 2010 to lay out the Fed’s policy options. Among the options he mentioned was a second round of bond purchases to pump cash into the financial system and juice the U.S. economy.

The speech — and growing evidence that the economy needed help — ignited a 28-percent stock market rally over the next eight months. The Fed actually began the purchases — a policy known as quantitative easing, or QE2 — in November 2010.

This morning, attention will again be riveted on Bernanke’s annual speech. Never mind that most analysts don’t expect him to offer significant new guidance about what the Fed might do next. Many think Bernanke wants more time to survey the economic landscape.